A thought experiment: Don't all throw your tomatoes at me at once, but as a means of addressing the problem of long-term personal financial solvency, I would like to put out a radical potential solution to further our discussion. What if we created a universal multi-payer public financial care system modeled on well-functioning universal health care systems? I am suggesting the better international health care systems (e.g., the Netherlands, Israel) as a model rather than well-thought-of international pension schemes (like those of Australia or Chile) because what I'm going for here is something far more ambitious - that is to say, lifelong wealth care.
In this model, individuals would visit their financial advisor as they would their doctor. Instead of getting a blood test, their savings and expenditures would be examined, with the advisor providing the advice appropriate to that individual at that stage with a view toward long-term solvency. The service would be free (the government would pay, and here's where I expect FAs to hurl tomatoes) but the individuals visiting the advisor would be given costly prescriptions -- i.e., you need to increase your contributions to your 401(k) to the maximum to receive the company match, and on top of that you need to fund an IRA so that you will be on track to fund your retirement at a living standard above the poverty level.
Because there are a variety of investment ideologies, the above-described public system would offer choices. One system might favor aggressive equity allocations via indexing, another might take a more conservative, income-centric bucket approach.
There would be a parallel private system of financial advice for those who opt out of the public wealth-planning consortia and think they could do better with, say, UBS or Merrill Lynch. The government would maintain elaborate statistics comparing financial outcomes and disseminate this information widely, to ensure choice, competition and overall systemic improvement.
Advisors would have a greater variety of career paths. Private advisors would likely earn a lot more money; salaried public advisors may appreciate the freedom to help people in need without concern for building their own businesses. DIY investors would have a professional to speak with routinely and needn't grumble about fees.
Please share your thoughts in our comments section. Herewith, today's advisor-related links:
- Rodney Johnson discusses Social Security's dwindling surplus, and the similar though worse situation the Chinese face.
- Ron Rimkus, CFA offers a provocative, street-level view of the war on cash.
- Lance Roberts on the psychological impact of loss, and how it prompts investors to do the opposite of what they should do.
- Nanette Abuhoff Jacobson of the Hartford Funds offers thoughts on portfolio changes for a reflating world.
- David Trainer discusses an effort to delay implementation of the fiduciary rule.
- For more content geared to FAs, click here.